Thursday, December 5, 2019

Oil whipsaws as traders await OPEC output decision

An OPEC branded flag sits on a table ahead of the 169th Organization of
Petroleum Exporting Countries (OPEC) meeting in Vienna, Austria, on
Thursday, June 2, 2016. Saudi Arabia is ready to consider a surprise
deal with fellow OPEC members, attempting to mend divisions that had
grown so wide many dubbed the group as good as dead. Photographer: Akos
Stiller/Bloomberg via Getty Images

Ahead
of Thursday’s meeting, Iraq said that it was pushing for a 400,000
barrel a day production cut on top of the existing agreement for cuts of
1.2 million barrels per day.

Helima Croft, RBC head of global
commodities strategy, said to CNBC ahead of the meeting that it was her
understanding that a larger cut has the support of the OPEC core
operating group, as well as its partner Russia.

24-country OPEC+
has cut output by 1.2 million barrels per day since the beginning of the
year, and the current deal runs through March of 2020. Production cuts
were first implemented in January of 2017 in an attempt to bolster
prices as the U.S. kicked up its shale oil production, among other
things.

As the meeting kicked off reports conflicted over who proposed the cuts. WTI briefly sold off after CNBC reported
that one senior Saudi oil official denied pursuing a deeper round of
production cuts. On Monday Reuters had previously reported that Saudi
Arabia could be in favor of deeper cuts in order to give Aramco a boost
as it hit the public market.

Also in focus will be individual
country’s production output. Again Capital’s John Kilduff said that he
believes Saudi Arabia is “open” to a cut, but that the most important
thing to the nation is that country’s comply with the quotas that are
currently in place.

This is the first meeting with the new Saudi
energy minister, Prince Abdul Aziz bin Salman, who is the son of the
King and half-brother to Crown Prince Mohammed bin Salman.